Volkswagen’s Dieselgate Scandal Spirals US Expenditure Over $20 Billion, $15bn for Compensation Settlement with Environmental Authorities

2016 has been quite an eventful year for Volkswagen AG. The company faced dieselgate backlash in some of its most important markets all around the world. Volkswagen saw the same situation in the US market where it was trying to compete with local best-sellers like Ford and GM, along with Japanese automaker Toyota.

It faces an immense expenditure regarding fines, recall expenses, settlements and further losses in sales. In 2015 September, news erupted that Volkswagen has been using software that allowed its vehicles to cheat on emission tests. After that, the company’s stocks took a major downturn. It faced a major halt on diesel car sales and also damaged customer perception which further decreased vehicle sales.

The company came across a lot of fines and allegations in different markets all around the world. Volkswagen recently agreed to pay all the penalties and fines in the US so as to resolve federal, environmental, criminal and other civil claims against the automobile manufacturer. The company has further agreed to plead guilty on three different counts: –

  • A penalty of 1.45 billion dollars to resolve the civil claims by Customs and Border Protection Agency under customs and the environmental laws.
  • It faces a civil penalty of 50 million dollars to the Department of Justice for settling potential claims that were asserted under the Financial Institutions Reform, Recovery, and Enforcement Act.
  • It also faces a criminal fine amounting to 2.8 billion dollars.

The combined value of all these fines and penalties come to a total of 4.3 billion dollars. They will be spending 20 billion dollars in the US regarding emission scandals, recalls, fixes and much more. The company has agreed to a 15-billion-dollar deal with the authorities in the US, where 10 billion dollars have been set aside for the customers.

It will give owners of the affected 475,000 eligible Volkswagen and Audi 2.0L automobiles in the US the option for a fix or a buyback along with cash compensation of 5000-10000 dollars for every person, provided if and when the repairs are made available.

The company will also pay 2.7 billion dollars for 3 years to an environmental trust which will be used to remediate extra pollution in the United States. They will also invest 2 billion dollars over a period of 10 years into vehicles with zero emissions.

Volkswagen Group will also face severe penalties if they cannot buy back of fix 85% of the vehicles that were affected, by June 2019. The company has further agreed to pay $1.2 billion dollars to 652 brand dealers in the United States to compensate them for the losses that they suffered because of the dieselgate scandal.

VW agrees to dieselgate fine

The company will resume making incentive payments to dealers, begin buybacks of the diesel vehicles and also suspend all capital improvement it wanted the dealers to make, for a period of 2 years, according to their deal with the US.

Last year in December, the company had a 1-billion-dollar agreement with the US regulator to acquire 83000, 3-liter engine cars from the road. The specific deal comes with buybacks from 20,000 owners of the 2009-2012 Audi Q7 and 2009-2012 Volkswagen Touareg. It will also come with free fix and payouts for the newer 2013-2016 3-liter diesel models 63,000 owners.

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